Editorial: Keep the skies open

The Detroit News March 14, 2015

Cheating by Gulf state airlines distorts the international air traffic market and placing U.S. carriers at a disadvantage

Free and fair trade demands that all parties engage in commerce on a level playing field. Or in the case of airlines, in level skies.

That’s the idea behind the Open Skies Agreements the United States has been negotiating with other countries since 1992. There are now more than 100 such trade pacts in place to assure that foreign carriers don’t use subsidies from their home governments to steal business from U.S.-based airlines.

And they’ve worked for the most part, allowing multiple players to expand air service in an efficient global marketplace. Passengers benefited from both competitive fares and increased travel options.

But the arrangement has hit some significant turbulence.

The United Arab Emirates and Qatar are ignoring the rules and channeling huge subsidies to carriers based in the Gulf, allowing them to cut fares below market rates and grab a greater share of passengers.

U.S. airlines are accusing state-owned Emirates, Etihad and Qatar airlines of taking more than $40 billion in government hand-outs, fueling a worldwide expansion of their reach.

The operating subsidies allow the Gulf airlines to cut fares below the level at which U.S. airlines can profitably fly. So passenger traffic is shifting to those foreign carriers, particularly on international routes servicing south Asia.

The Gulf airlines have 25 flights a day to the United States that then fly on to other parts of the world. And while that may not sound like such a large number, each international flight has a spin-off benefit of 1,000 jobs, the domestic airlines contend.

Very little of the traffic is generated in the home airports of the Gulf carriers. Rather, most of their passengers board the connecting flight in the U.S.

For passengers, fares may drop as the Gulf carriers fly at a loss to increase their market share. But ultimately, the number of competing flights will fall and prices for travelers will rise.

This is the equivalent of a state-owned foreign automaker dumping vehicles on the U.S. market at prices far below the real cost of production.

The Gulf carriers have been steadily adding capacity, distorting the marketplace. Their U.S. competitors also accuse them of creating vertically-integrated, wholly state-owned aviation sectors that include complex relationships between their governments, airlines, ground handlers and airports — all in violation of the Open Skies Agreements those countries signed.

Ultimately, such disregard for trade pacts will drive U.S. carriers out of certain international routes, costing jobs in this country.

The agreements signed with the Gulf states are very generous, placing few restrictions on their ability to serve the lucrative American market.

But they do demand that the service be based on honest trade practices.

The Obama administration can not allow the U.S. airline industry to be undermined by predatory, state-owned competitors.

It should demand that the Gulf states honor the Open Skies Agreements or risk losing access to U.S. Airports.

Originally published at DetroitNews.Com: Editorial: Keep the skies open

americans4fairskies2015Editorial: Keep the skies open